In 1998, Bud Colligan left Macromedia, the Web design and development software company he co-founded, led and took public, for two very different, but allied endeavors. Colligan joined Accel Partners, the blue-chip Silicon Valley venture capital firm that would back some of this century's highest fliers, including Facebook Inc. and Groupon Inc. He soon after raised $10 million for a new nonprofit he called Pacific Community Ventures, a San Francisco-based attempt to provide pro bono business advice and funnel money into low-income Californian neighborhoods through equity investments.

"I'm a big believer in economic development versus handouts," says Colligan, who at the time he formed Pacific Community Ventures saw venture capital as an obvious model for his approach to philanthropy. "I wondered how come [venture capital] couldn't penetrate into communities and create wealth."

Pacific Community Ventures is an American pioneer at what has become known in the past three years or so as impact investing. This combines the goal of market returns and social benefits through equity investment.

More than a decade on, Pacific Community Ventures has grown significantly and expanded. To ensure adequate ongoing capital and attract limited partners that require returns on their capital, private equity investments are now housed in the for-profit vehicle called Pacific Community Management. PCM is set to raise a fourth fund, targeted at $75 million. That's almost double the third, $42 million fund, which closed in 2007, and more than 10 times the initial $7 million fund that closed in 2000.

Policy, research, analytics and best-practices advice to other impact investors have joined business advisory services in the nonprofit entity. One program under way is a counseling effort to prevent commercial foreclosures.

Pacific Community Ventures can tap more than 200 advisers, a formal network Colligan likens to the informal networks venture firms employ. These advisers volunteer their time in everything from serving on boards to business introductions. "We're basically doctors without borders, only we're business people within borders," says Beth Sirull, the firm's executive director.

Pacific Community Ventures advised 176 companies last year, the vast bulk of which, Colligan says, are too small to attract equity investors. (Minimum revenue is $250,000.) Pacific Community Ventures estimates these companies translate into more than $50 million worth of wages in the pockets of workers in low-income communities.

The third fund, by contrast, will end up putting money into 10 to 12 businesses, with an average investment size of $3 million that would yield anywhere from 20% to 30% stakes. Limited partners include the California Public Employees' Retirement System, Citigroup Inc., Wells Fargo & Co. and several other institutional investors and family offices.

The nature of the investments precludes the kind of spectacular gains -- and spectacular flameouts -- likely in venture capital. Still, Pacific Community Ventures believes it has racked up some formidable successes.

Colligan cites the late 2005 sale, at an undisclosed price, of Timbuk2 Designs Inc., a San Francisco producer of bicycle messenger bags, to a group led by private equity concern VMG Partners. The company employed low-income workers, mostly Chinese seamstresses. Forty of these workers shared a $1 million bonus with the sale. Pacific Community Ventures made 4 times its investment.

Sirull focuses on two current portfolio companies. An investment in Galaxy Desserts, in the distressed city of Richmond, Calif., enabled expansion and the creation of "numerous jobs" and higher wages. "All of a sudden, the company is in a very different place," Sirull says. Galaxy Desserts, whose products Oprah Winfrey has touted, has ranked in the Inc. 5000 for the past four years.

Evergreen Lodge, in Yosemite, offers summer employment and recreation for at-risk urban youth. "It can be a very life-changing experience," says Sirull, who recalls meeting one young man whose father was in jail and mother dead of AIDS, but who was given work at the lodge and is now in college.

Colligan stresses that the lodge isn't merely an altruistic investment. The fund has made a 9% preferred return on Evergreen while maintaining its equity share. The lodge itself has almost doubled in size.

Colligan, 57, calls his involvement "very intense for the first three, four, five years." He's been able to pull back somewhat as the organization matured and a professional team was built.

It's "like a startup," he says, adding that he "came up with the idea, organized people around the idea for a board of directors and advisory board, raised the money to make it a reality and then hired some very capable people to build the organization with me."

He now has his eye on politics.